All Forum Posts by: AJ Exner

Quote from @Summer Shelton:

Quote from @AJ Exner:

Quote from @Summer Shelton:

I am on the hunt for my first real estate investment. Would you say it's necessary to create an LLC to purchase the property?

located in Missouri,  St.Louis area

Hey Summer,

Great time and market to be investing, are you looking at more of a BRRR strategy or buy and hold? My clients up in STL are mainly focusing on BRRR as there are ALOT of opportunities.

Generally speaking, it is very easy to setup an LLC in MO, so honestly it never hurts to have one as there might be some deals and lenders that would prefer it. You won't be able to do conventional lending with it, but if you do Private money/DSCR deals through an LLC, then it would stay off of your personal credit and not impact your DTI as you are starting out. 

Plus, there are benefits to the flexibility that LLCs provide. You can add a partner to bolster 'experience' on rehab loans, to adding a credit partner to get optimal rate and terms. Not to mention the liability coverage that an LLC provides as a landlord (varying thoughts on that). Overall, I would say that it is easier to have one and not need it than to need it and not have one.

Hope that helps, TLDR, not necessary, but could be helpful.

@Aj Thank you for the feedback! I am looking to use the BRRR strategy to purchase properties. I love seeing the growth in the area. It does have a tremendous amount of oppertunities.

What part of the city are you looking in? Are you in the City itself or looking more in the suburbs?

Victor, 

Congrats on taking the step, hoping that it is the first of many towards building generational wealth.

As for the financials, they certainly can work, but you will be hindered at first by the lack of 'on paper' experience as well as the property values. There are fewer lenders that will lend to that low of property values, and less for the proposed total loan amount. With those factors, it might be a little more difficult to fight financing, not impossible, but trickier.

Any work you can do to find good referrals in that area will be great. Work with your friend there, and maybe even see if he would be willing to jump onto the first deal or two with you (on an entity of some kind) to help get the deals done. It can also help as you find contractors and handy men in the area. 

As for the refis/DSCR potential, that type of price range (80-120ish) is great for a steady cash flow starting out. The idea of utilizing HUD tenants is a government-subsidized stabilized rent that is often times a little higher than what the 'market' rent in the area is. It has its downfalls, but some areas can provide a steady cash flow if you find a good property manager who can help screen tenants.

I hope that helps, it sounds like you have a solid strategy and I know that the BP community is always looking at ways to help and encourage. Would be happy to help in any way I can.

Quote from @Summer Shelton:

I am on the hunt for my first real estate investment. Would you say it's necessary to create an LLC to purchase the property?

located in Missouri,  St.Louis area

Hey Summer,

Great time and market to be investing, are you looking at more of a BRRR strategy or buy and hold? My clients up in STL are mainly focusing on BRRR as there are ALOT of opportunities.

Generally speaking, it is very easy to setup an LLC in MO, so honestly it never hurts to have one as there might be some deals and lenders that would prefer it. You won't be able to do conventional lending with it, but if you do Private money/DSCR deals through an LLC, then it would stay off of your personal credit and not impact your DTI as you are starting out. 

Plus, there are benefits to the flexibility that LLCs provide. You can add a partner to bolster 'experience' on rehab loans, to adding a credit partner to get optimal rate and terms. Not to mention the liability coverage that an LLC provides as a landlord (varying thoughts on that). Overall, I would say that it is easier to have one and not need it than to need it and not have one.

Hope that helps, TLDR, not necessary, but could be helpful.

Hey Margaret,

Great opportunities for sure. From the lenders perspective, there is slight hesitation on the GA side of things, as there are some intricacies within Georgia law when it comes to landlord liability that makes lenders a a little more hesitant in lending there. They definitely will continue to, as the markets in and around Atlanta are very good right now, but I would lean Little Rock as there are a lot of good opportunities there with good property values and rental income.

If there is one that you frequent more, that could also be helpful as you could check on your property a bit more that way.

There are quite a few that I am aware of that will do a 50k purchase with 100% of the renovation. Is this your first one or have you done a few before? 

Often times the terms will shift based on the purchase price as well as your FICO.

Quote from @David Denney:

Need advice on a single family rental. My parents bought the hime for 57k. My father and I completed a full remodel. He now has 70k in it. I helped him get it rented- 1200/ month.

My parents have decided to offer the house to my wife and I for 80k. The ARV is Likley 110k to 145k. I'm guess 130k.

Issue: we have no cash to put down as money has been tight. 

I called a credit union and they said I could do a gift of equity loan but still need 5k for savings or a heloc. Both would have My monthly payment between 750 and 900. Any thoughts on the best route to go with little or no money down? My parents are flexible and will work with us. Would love to hear thoughts on loan ideas- thanks folks!

Would your parents consider going in on an LLC together with you and your wife? Most lenders are going to struggle with a purchase deal as it is because of it being an Arms-Length Transaction.

Hey Daniel,

Did you find an answer on this? Would be happy to talk through any details if you are still on the hunt and looking for some help here.

Hey @Spencer Elliott

I guess it would also depend on the 'builder's experience as well. Have they been on title on any rehab/fix and flip projects the last few years? Are they Licensed? What type of experience besides GUC to they have to offer? Do you guys have good FICO scores that could be used as leverage?

It would be a tough sell for sure, but you own the land and have put in for the soft costs, so that is helpful. We would just need to know a little more if I was looking at this for one of my clients.

Quote from @Raj Khadilkar:

Thanks to BP community. Bunch of knowledge out there which we could lean on espcially from overseas. Would apprciate if some of the lending gurus / specialists could guide me on my below scenario  

Overseas investor (NZ citizen resding in NZ). BRRRR is my model. I am in the process of cash - out refi' ing 4 of my SFR's in TN. All of them are under one LLC and currently are financed with local Hard money lender - total ARV is about 480K with DSCR about 1.2 - individually. Was pushing for 75% LTV on this refi but eventually had to accept 65% as lenders needed guarantors (who are US residents) with 21% stake in my LLC (infact someone asked me 81%.....lol) to lend anything more than 65%.

Spent about 4 motnhs to find a lender who could lend 65%. Went well with Refi till we hit another block for "cash at closing". Lender is asking for a cash at closing (cash reserves as some lenders calls it) to the extent of 70 - 80K in USA banks (which is about 20% of the mortgage loan amount). Understand 6 months of PITI which in this case comes to about 15K at about 9% interest. They also say that each property needs to be considered individual mortgage - meaning high Origination and processing costs. Few questions

- Firstly why it should be treated as individual SFR's and cant be done as portfolio?

- Does LTV should be that low without any guarantor ? dont mind another point up on the interest rate, it will still will qualify 1.15/1.1 DCSR

- Cash at closing requirment (80K) is extremely high, are their any new rules for overseas investors?

- I have few other investments in other countries - could the cash at closing needs to be in USA? Cant show 80K but 20K in other countries bank accounts is no good? 

- If I add Guarantor with 21%, what advantages I may get? Also how does affect US residents credit score? Dont want to block their investment plans!! 

- Will my NZ credit score valid in USA?

- Lastly if I get my ITIN help anyways (understand that it helps for FIRPTA purpose) - better LTV, Better interest points, Cash at closing etc?

Many thanks in advance..
  

Hello Raj,

It feels like these questions were mostly answered, but I would draw particular emphasis on your Guarantor idea. That is one of the big advantages to having and owning properties in an LLC, you can add some flexibility that can help strengthen your deal and provide better leverage.

If you think about it from a lender's perspective, there might be flight risk in never hearing from the individual again, especially if they do not live there. However, with another member of the entity who lives in the US, has citizenship there, and provides a point of contact for the lender to reach out to in case there is an issue, it would encourage them to help maximize leverage on cash out refinances (75-80% LTV).

I help a few of my clients do this, so it is definitely possible if you know how to do it on the front end.

Quote from @Jay Hinrichs:

Quote from @Robin Gravlin:

As an investor I am always looking at saving.  I don’t want to pay an additional 10k to  carry only for a few weeks to a couple of months which seems crazy.

I understand but doing a new loan of that size is going to cost the exact same amount OR MORE.. once you figure in new escrow  title insurance  and other junk fee's the lender is going to charge on top of at LEAST 2 points.. only way to get out of this is for you to cut a check or have friends and family help you out for very little return. but either way what a whopper deal for you be happy !!!

Definitely agree with Jay on this one, the cost that you would incur to essentially do a refinance-rehab deal, or some kind of a stabilized bridge, you would be charged a few points and third party fees to change lenders and maybe save a point on the interest rate and add a couple of months extension would be a tough pill. It would also take away potential bandwidth of you that might delay the finish of the project.

Has the lender been responsive and accommodating up to this point?